Friday, January 23, 2015

Food stamp usage surges when the economy enters into a recession. That is no surprise. In fact, this is the design of the program. A safety net when things get bad. But if we are to believe headline indicators, the economy is improving so we should see food stamp usage decline substantially. It has not. Thanks to the low wage recovery, you have a new class of working poor. We still have an incredibly high number of Americans on food stamps as we start 2015. Dollar stores have done a great job capitalizing on this army of people needing low cost items to buy. Instead of selling trivial junk, many dollar stores now make most of their volume through food sales. Working and being on food stamps doesn’t seem like a perfect combination but it is if you are one of the millions in thelow wage economy. As we will highlight in this article, we are finding a high number of Americans unable to dig themselves out of the hole set from the Great Recession.

The permanently high number of Americans on food stamps

It is typical to have food stamp usage fall when the unemployment rate declines. The stock market is near a peak so you would expect that this would be trickling down throughout the economy. It is not. Food stamp usage is remaining stubbornly high.

Take a look at this chart:

Unemployment went up and so did food stamp usage. No surprise. But as the unemployment rate fell, the percentage of Americans on food stamps has remained very high. There is a big gap going on here. We still have 46 million Americans on food stamps:

The program actually faced cuts recently which doesn’t make much sense since most people on food stamps are truly poor. We also have many that are working but still don’t make enough to cover basic necessities like food. Some states have nearly half of their adults not working. What you have unfolding is some structural damage to the underlying workforce.

The rise of dollar stores

It should then be no surprise that we have a large growth in dollar stores across the country. Take a look at the growth of Family Dollar stores in the US:

More than 8,000 Family Dollar stores are now in the US. This is a healthy increase from 6,500 back in 2008. It is also no surprise that dollar stores have done exceptionally well on the stock market:

When you have 46+ million Americans on food stamps in what is supposed to be a solid economic recovery, you have to really ask what is happening to the underlying workforce. You also haveone-third of working Americans supporting the other two-thirds. These kind of numbers are simply not conducive to sustaining a solid middle class.

It is no surprise then that the first major initiatives coming out in 2015 are dealing with the middle class. 2016 should be a year focused on middle class challenges. Yet how do you confront these challenges? The goods sold at these stores are at low costs because labor costs are kept low. Many of the products are brought in from lower cost countries. Do you raise costs and pass them off to people that can’t clearly afford it? You can see the conundrum here.

There are no easy answers here but you can be sure that business at dollar stores will remain consistent for years to come.

Imagine a world where mosquito-sized robots fly around stealing samples of your DNA. Or where a department store knows from your buying habits that you’re pregnant even before your family does.

That is the terrifying dystopian world portrayed by a group of Harvard professors at the World Economic Forum in Davos on Thursday, where the assembled elite heard that the notion of individual privacy is effectively dead.

“Welcome to today. We’re already in that world,” said Margo Seltzer, a professor in computer science at Harvard University.

“Privacy as we knew it in the past is no longer feasible… How we conventionally think of privacy is dead,” she added.

There are two operant Crowns in England, one being Queen Elizabeth II.

Although extremely wealthy, the Queen functions largely in a ceremonial capacity and serves to deflect attention away from the other Crown, who issues her marching orders through their control of the English Parliament.

This other Crown is comprised of a committee of 12 banks headed by the Bank of England (House of Rothschild). They rule the world from the 677-acre, independent sovereign state know as The City of London, or simply’The City.’

The City is referred to as the wealthiest square mile on earth and is presided over by a Lord Mayor who is appointed annually.

When the Queen wishes to conduct business within the City, she is met by the Lord Mayor at Temple (Templar) Bar where she requests permission to enter this private, sovereign state. She then proceeds into the City walking several paces behind the Mayor.

Wednesday, January 21, 2015

Even As European Central Bank Is Set to Unleash a Massive Round of Quantitative Easing, Central Bank Heads Admit QE Doesn’t Work

The former head of the Bank of England – Mervyn King – said today that more QE will not help the economy:

We have had the biggest monetary stimulus that the world must have ever seen, and we still have not solved the problem of weak demand. The idea that monetary stimulus after six years … is the answer doesn’t seem (right) to me.

QE is not going to help at all. Europe has far greater reliance than the US on small and medium-sized companies (SMEs) and they get their money from banks, not from the bond market.

***

Even after the stress tests the banks are still in ‘hunkering down mode’. They are not lending to small firms for a variety of reasons. The interest rate differential is still going up.

***

Mr White said QE is a disguised form of competitive devaluation. “The Japanese are now doing it as well but nobody can complain because the US started it,” he said.

“There is a significant risk that this is going to end badly because the Bank of Japan is funding 40pc of all government spending. This could end in high inflation, perhaps even hyperinflation.

“The emerging markets got on the bandwagon by resisting upward pressure on their currencies and building up enormous foreign exchange reserves. The wrinkle this time is that corporations in these countries – especially in Asia and Latin America – have borrowed $6 trillion in US dollars, often through offshore centres. That is going to create a huge currency mismatch problem as US rates rise and the dollar goes back up.”

***

He deplores the rush to QE as an “unthinking fashion”. Those who argue that the US and the UK are growing faster than Europe because they carried out QE early are confusing “correlation with causality”. The Anglo-Saxon pioneers have yet to pay the price. “It ain’t over until the fat lady sings. There are serious side-effects building up and we don’t know what will happen when they try to reverse what they have done.”

The painful irony is that central banks may have brought about exactly what they most feared by trying to keep growth buoyant at all costs, he argues, and not allowing productivity gains to drive down prices gently as occurred in episodes of the 19th century. “They have created so much debt that they may have turned a good deflation into a bad deflation after all.”

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